[M]y personal opinion is that he should not be invited to speak. Mr. Ahmadinejad is a reprehensible and dangerous figure who presides over a repressive regime, is responsible for the death of American soldiers, denies the Holocaust, and calls for the destruction of Israel. It would be deeply regrettable if some misread this invitation as lending prestige or legitimacy to his views.

Tax complexity has been a major concern since the modern income tax was enacted. Reformers have routinely seized on complexity to justify their favored change, whether it be eliminating progressivity or the capital gains preference. More recently, consumption tax advocates have claimed that such taxes are inherently less complex than income taxes. A number of scholars have attempted to test these claims. However, such scholarship has largely been theoretical and speculative, as we do not know what form such a tax might take. Rather than imagine a hypothetical income-based consumption tax and speculate as to its implementation, in this article I study an actual tax of this type, which has existed for over 2,500 years: biblical tithing. Tithing can be seen either as a simple, flat-rate income tax, where the definition of income is limited to agricultural produce, or as a simple income-based consumption tax, where consumption is measured indirectly via the proxy of income (i.e., produce) and returns to capital are excluded from the tax base.

This study reveals that any income-based tax, whether a true income tax or an income-based consumption tax, will necessarily be complex. Questions of income inclusion, tax avoidance, and timing are unavoidable, and those issues alone generate significant complexity. This conclusion has implications both for the reform of our current income tax and for those who seek to replace it. If complexity exists in this fairly straight-forward tax system, it will certainly arise in any of the more sophisticated income tax or income-based consumption tax systems currently under discussion. I do not mean to suggest that simplification efforts are futile. Rather, I would caution that the impulse to effect radical changes to the current tax system in the name of simplification may, like the proverbial fourth marriage, reflect a triumph of hope over experience.

The IRS yesterday proposed regulations (REG-138637-07) toughening the Circular 230 standards that apply to tax practitioners advising clients and preparing tax returns. The regulations state that to sign the return, a practitioner must have a "reasonable belief" that (1) the tax treatment of each position on the return would more likely than not be sustained on its merits; or (2) the position has a reasonable basis and is adequately disclosed to IRS. A practitioner may not advise a client to take a position on a tax return, or prepare the portion of a tax return on which a position is taken, unless those two conditions are met. The rules would be effective for returns filed or advice provided on or after the date that final regulations are published in the Federal Register, but no earlier than Jan. 1, 2008.

Update: The IRS has issued final regulations (RIN 1545-BA72), effective September 26, 2007.

Continuing our series of responses from various legal luminaries to the question: What is the single best idea for reforming legal education you would offer to Erwin Chemerinsky as he builds the law school at UC-Irvine?

Erwin, the people who did not want you to have this job are dead white men who happen still to be alive. The mission of the 21st century law school is to demonstrate that they were right to be afraid of you, of us, of the rainbow people who in this new age have come to claim what is ours. Its name is America. The new law school must help us take it back.

Architecture: Consult departments of physics and design - the atrium should remind all who enter the law school that Auschwitz was only yesterday and Darfur is across the street. Students should have to wade through Guantanomo Bay to get to Constitutional Law. In Fred Korematsu Law Library display portraits of migrant workers, the wrongfully executed, and Rosa Parks.

Appointments: A faculty like California! Having people of color as half of their professors will seem as natural to your students as having mainly white men seems to students at other schools.

Agenda/First faculty meeting: What is role of law school during despotic regimes? Spanish fluency - mandatory for admission, or only for graduation? Should "Justice and Re-distribution of Wealth" be a required course, or integrated into the entire curriculum?

Each morning students will pledge allegiance to the flag by discussing how to safely dismantle California state prison system.

On wall of faculty lounge: "The lawyer is either a social engineer or a parasite." Charles Hamilton Houston.

Continuing our series of responses from various legal luminaries to the question: What is the single best idea for reforming legal education you would offer to Erwin Chemerinsky as he builds the law school at UC-Irvine?

Many law schools view adjunct faculty as cannon fodder. If the law school needs a dozen bodies to teach, say, legal writing or trial advocacy, it's worth a sweep through the local legal community to round up the necessary bodies. That is, however, the very least that adjunct faculty can do.

Scholars sometimes doubt whether full-time practicing lawyers have the time, inclination, and ability to teach real, substantive classes. Many practitioners don't, but enough do to make it worth the search. I have taught Advanced Civil Procedure on the adjunct faculty of Case Western Reserve University School of Law since 1997. During that time, a half dozen of my colleagues at Jones Day have asked whether similar opportunities might exist for them.

Expanding the adjunct faculty benefits both the local legal community and the law school. As any scholar knows, the best way to learn a subject is by teaching it. Employing practitioners on adjunct faculties thus improves the quality of the local bar.

The law school also benefits from this cross-fertilization. First, a law school can expand its course offerings to fields in which practitioners toil daily, but scholars are unlikely to tread. In many areas of law, the most interesting concepts come from experience, not book learning.

Second, practitioners bring a different approach to the law than scholars. People are naturally influenced by the lives they live. Folks who practice law will naturally teach differently than those who study legal issues from a more theoretical perspective.

Finally, enlisting practitioners on the adjunct faculty builds bridges that can benefit law schools in other ways. Firms and schools can co-host conferences; firms can suggest topics for events or provide speakers; lawyers may even be inclined to contribute money to law schools with which they have an on-going relationship.

Congress should consider requiring IRS to periodically adjust for inflation, and round appropriately, the fixed dollar amounts of civil tax penalties to account for the decrease in real value over time and so that penalties for the same infraction are consistent over time.

The extensive literature on legal transitions has formed a general position in favor of establishing a governmental transition policy; the primary debate concerns whether the policy should be one of systematically mitigating or not mitigating transition losses. Arguments on both sides generally have assumed a sharp dichotomy between a substantive legal change and the transition treatment associated with the substantive change. Focusing on federal tax legislation, this Article challenges that assumption and the normative conclusions that it supports.

Specifically, this Article identifies compromise as an important component of the tax legislative process and argues that the ability to provide or not to provide transition relief on an ad hoc basis facilitates such compromise. A policy either to mitigate or not to mitigate tax transition losses would remove this mechanism and, consequently, would cause legislators to pursue compromise through other means, such as by scaling back the substantive policy changes they otherwise would enact. This effectively tilts substantive tax policy toward the status quo.

The analysis yields three main conclusions. First, tax transition policy is not exogenous to substantive tax policy. Second, the likely effects of tax transition policy on the development of substantive tax policy raise doubts about the normative arguments that have been made for tax transition policy. Finally, contrary to the general consensus of the literature, the ad hoc approach to tax transitions in current practice yields results that may be no less desirable than the results of following a formal tax transition policy.

As we announced on Friday (here and here), Bill Henderson and I are using the Erwin Chemerinsky/UC-Irvine flap to generate and publicize the best ideas about reforming legal education from some of the leading thinkers in the law school world. We asked various legal luminaries to give us 250-word answers to this question:

What is the single best idea for reforming legal education you would offer to Erwin Chemerinsky as he builds the law school at UC-Irvine?

Bill and I offer our thoughts below; we will post the responses of others in the coming days. [We also are accepting unsolicited contributions here.]

The “conventional wisdom” among law school faculties and deans is that law students, especially law students who academically rank low in their class, should take as many of the courses whose subject matter is tested on state bar exams (i.e. contracts, torts, property, etc.) as possible in order to improve their chance of passing state bar exams…. Many law schools mandate that low-ranked law students take these courses in their second and third years of law school in the belief that doing so increases the ability of those students to pass state bar examinations.

To test this theory, Rush and Matsuo documented every student’s courseload for five different graduating classes at the St. Louis Law School, analyzing the number of bar topic courses taken against bar passage rates the first time the students sat for the exam. Their results were unequivocal: no relationship existed between law school courseloads and the passage rate of students ranked in the first, second or fourth quarters of their law school class, while only a weak relationship existed for students who ranked in the third quarter.

Although there is consensus about the need for equity, academics and policy makers disagree about the best tax system because we have ignored the need to first identify equity goals appropriate for a just government and then to design a tax system to help achieve those goals. This article proposes that the principal equity goal underlying a just government is the creation of equal opportunities for all citizens to achieve self realization, i.e. to maximize their potential. It proposes, therefore, that a tax should be designed to achieve equal opportunity for self realization as one of its principal goals. Viewing equal opportunity for self realization as a design issue leads to the identification of another principle that is foundational - the promotion of democracy. Both political philosophy and empirical literature suggest that equal access to the electoral process and participation in the community has to exist in order for equal opportunity for self realization to exist. Designing a tax system to help achieve these goals will not only increase equity, but also may provide efficiency gains that analysts have previously ignored.

In the midst of a crackdown on Philadelphians who owe back property taxes, Mayor Street is red-faced after learning that he is among the scofflaws.

About three weeks ago Mayor Street announced an aggressive effort to reclaim one-third of the $700 million that the city is owed in back property taxes: "If the taxes are delinquent, you will have to pay."

A local newspaper did some digging and found that among those who owe money is John Franklin Street, our mayor. The Philadelphia Daily News found that he had not paid taxes on two of his four North Philadelphia properties since 2003, and owed $4,800.

[C]ompulsory service is a tax on those serving that has many of the characteristics of a very bad tax. It is a tax in kind, on the time of young persons, rather than a tax on income, wealth, or spending. A tax in kind limits the ability of those taxed to respond by substituting toward a more efficient allocation of their resources. In-kind taxes also limit how governments can spend their tax receipts since these tax receipts are not general purchasing power. Universal service is also a narrow-based rather than a broad-based tax. Broad based taxes, such as a general value added tax on all transactions, are better because marginal tax rates, and hence the inefficiency caused by the tax, can be lower for a given level of receipts since the base being taxed is more extensive. By contrast, narrow taxes have high marginal rates for any given revenue, and hence generally distort behavior much more. In the case of service, young individuals who have much better opportunities in school or at jobs that do not qualify will be taxed heavily, as would young persons who greatly dislike spending all their time either in military service or at one of the recognized alternatives.

Narrow-based taxes often are enacted because of the weak political power of those being taxed compared to groups who benefit either directly or indirectly from such taxes. For there is no argument based on efficiency why young persons should be the primary suppliers of the resources needed to fund peacetime armed forces. The effects on efficiency would be better during a major war since then the social cost of the taxes needed to get enough young volunteers for the armed forces may exceed the social cost of a draft.

Tax reform and religion were two of the hot button issues during the last election. While at first glance these issues seem unrelated, a number of scholars have argued that religious values should guide our decisions regarding tax reform. This article posits that the relationship between religion and taxes is even stronger than has previously been suggested. People have been tithing for thousands of years. When they determine the amount of the tithe based on their income, the practice amounts to a religious income tax, or, more precisely, God's income tax.

This article explores the Jewish traditions of tithing, looking at both agricultural tithing, which is described in the Bible, and the practice of maaser kesafim, which involves tithing from all types of income, a practice that derives from the Bible but which developed more recently. Over the centuries, religious authorities have developed a sophisticated tax jurisprudence that holds lessons for us as we struggle with the questions of whether to reform our current income tax or replace it entirely with some form of consumption tax.

In comparing Jewish tithing traditions and Federal income tax, this article (1) tests claims that Judeo-Christian values require a progressive tax system; (2) examines the ways in which culture and context affect income definition (and are likely to do so in the future); and (3) explores whether a flat-rate income tax or consumption tax will be less complex than our current tax system, as proponents for such systems claim.

All Saints Episcopal Church (Pasadena, CA) has announced that the IRS has closed its two-year investigation into whether the church's tax-exempt status should be revoked because of an anti-war sermon delivered by its pastor on the Sunday before the 2004 presidential election. The September 10 letter from the IRS concluded without explanation that the sermon in question constituted improper intervention in the 2004 Presidential election but did not take any action to revoke its tax exemption because "this appears to be a one-time occurrence and that you have policies in place to ensure that the Church complies with the prohibition against intervention in campaigns for public office." The church has demanded an investigation of the IRS and an apology.

Ellen Aprill, a law professor at Loyola Law School and a tax law specialist, also called the unclear outcome of the case "puzzling" and said it underlined the need for the IRS to explain which activities violate the rules against intervening in a political campaign.

See also the Associated Press. Here are the documents released by All Saints Church:

A law degree isn't necessarily a license to print money these days. For graduates of elite law schools, prospects have never been better. Big law firms this year boosted their starting salaries to as high as $160,000. But the majority of law-school graduates are suffering from a supply-and-demand imbalance that's suppressing pay and job growth. The result: Graduates who don't score at the top of their class are struggling to find well-paying jobs to make payments on law-school debts that can exceed $100,000. Some are taking temporary contract work, reviewing documents for as little as $20 an hour, without benefits. And many are blaming their law schools for failing to warn them about the dark side of the job market. ...

The law degree that Scott Bullock gained in 2005 from Seton Hall University -- where he says he ranked in the top third of his class -- is a "waste," he says. Some former high-school friends are earning considerably more as plumbers and electricians than the $50,000-a-year Mr. Bullock is making as a personal-injury attorney in Manhattan. To boot, he is paying off $118,000 in law-school debt. ...

Many students "simply cannot earn enough income after graduation to support the debt they incur," wrote Richard Matasar, dean of New York Law School, in 2005, concluding that, "We may be reaching the end of a golden era for law schools."

With economic integration rapidly growing at all level, understanding the incentives that this provides in the design of fiscal policies at the national level is fundamental. The most obvious implication of international competition on the taxation of mobile factors is a race to the bottom in the determination of tax rates. However, empirical evidence on the relationship between the strength of competitive pressures and corporate tax rates is mixed. The present paper aims to provide an in depth analysis of the implications of the diverse assumptions that have been made in the theoretical literature. Moreover, the main approaches to the empirical analysis of the relationship between competition and the level of taxation are presented. The paper shows that a large number of factors play a role and accounting for the interactions among all of them in a single model is extremely complicated. This may be seen as a main determinant of the variety in the results obtained so far, both in theoretical and empirical research.

Hoyt used plain old limited partnerships, right out in the wide open spaces, to generate and sell $103 million worth of illegitimate deductions to about 5,000 limited partners, most of whom had no idea what was happening. Hoyt's scheme was simple to a fault: He owned between 4,000 and 5,000 cows that were "contributed" to more than 100 syndicated limited partnerships. The only catch was that the same inflated-value cows were contributed to many different partnerships -- unbeknownst to the limited partners -- and each partnership, the returns of which were prepared by Hoyt himself, would claim and then allocate the expenses pertaining to the cows among its partners. If Hoyt needed more deductible expenses to make good on his promises to investors, he simply invented more cows on paper and then attributed and allocated associated expenses. By the time of his conviction and 20-year sentence on 52 counts of fraud and conspiracy, Hoyt had created some 38,000 cows from thin air, each of which generated millions in deductible expenses allocated to limited partners coast to coast.

These Comments are submitted in response to the request for comments contained in the preamble to the Proposed Regulations under Regulation § 1.152-4 as published in the Federal Register on May 2, 2007. The Proposed Regulations reflect amendments made by the Working Families Tax Relief Act of 2004 and the Gulf Opportunity Zone Act of 2005, and provide guidance on issues that have arisen in the administration of § 152(e).

Section 152(e) provides a special rule for claiming a child as a dependent for Federal income tax purposes in the case of parents who are divorced, separated, or live apart at all times during the last six months of the calendar year. In such situations the Code provides that if (a) the child receives over one-half of the child’s support from the child’s parents, (b) the child is in the custody of one or both parents for more than one-half of the calendar year, and (c) the custodial parent signs a written release that the noncustodial parent attaches to his or her tax return, then the child is deemed to be the qualifying child or qualifying relative of the noncustodial parent for purposes of the dependent exemption under § 151(c) and the child tax credit under § 24. The Proposed Regulations chiefly interpret and clarify the third statutory requirement. We agree with many of the decisions made in the Proposed Regulations and, in addition, we recommend that the Regulations, when finalized:

In most jurisdictions there are three separate spheres of transfer pricing analysis – income tax, customs and VAT. Although they share policy objectives, terminology and frequently borrowing methodologies from one another these domestic transfer pricing systems are not in harmony. Businesses find this lack of harmony costly, problematical, but also a planning opportunity. The door is open for arbitrage.

What if the transfer pricing rules within a jurisdiction were harmonized? The World Customs Organization (WCO) and the Organization of Economic Cooperation and Development (OECD) are considering this question.

This paper synthesizes the range of transfer pricing regimes currently in use, and argues that an affirmative answer to the WCO/ OECD's harmonization question can only be realized through technology – specifically, an IT-APA (Information Technology – Advance Pricing Agreement). Inherent differences embedded in the annual income tax are nearly impossible to harmonize with transaction taxes like customs and VAT if what is envisioned is a single, monolithic transfer pricing standard. If instead one imagines a standard that employs flexible, integrated rules, where separately harmonized (vertical and horizontal) elements are brought together in a certified automated system, then a harmonized transfer pricing standard can be realized.

It is reasonably clear that the real barriers to vertical harmonization of transfer pricing rules in income tax, customs and VAT have to do with timing and granularity. Income tax valuations are completed much later in time than customs and VAT regimes are comfortable with. Transaction taxes are designed around either having a number or a fixed formula that will objectively determine the number that is the tax base. An IT-APA harmonizes transfer pricing results by using a fixed formula. The formula is embedded in the taxpayer's VAT and customs software, and linked through the ERP to the financial statements and the income tax return. Certification of this digital valuation formula solves the timing issue in vertical harmonization.

This week's Tax Prof Spotlight inaugurates a series of profiles of folks starting their careers this fall as law school tax professors. I hope the profiles will help introduce our newest colleagues to the tax community.

Like most students I went to college with one career path in mind and changed as courses directed my interests to other areas. I thought I would pursue accounting but one class of accounting convinced me otherwise. I switched to a Government major and pointed toward law school.

My grandfather passed away shortly before I graduated from college and that influenced my law school choice. I attended the University of Richmond and lived on the family farm with my grandmother who had never learned to drive. I loved criminal law in school but was offered a job with Chief Counsel, IRS thus beginning journey to the tax profession.

[F]or some time, MIT ... says it wasn't properly calculating the average SAT scores of its freshmen. Those scores are closely scrutinized as a barometer of college quality. They are part of the formula used by U.S. News & World Report's influential annual rankings of schools.

When MIT dropped this year to seventh place from a three-way tie for fourth, its student newspaper, the Tech, asked why. In response, MIT revealed that its latest numbers factored in the SAT scores of non-native English speakers -- and that the school had excluded them for years. The change contributed to a 16-point drop in MIT's average SAT scores between 2005 and 2006. The reported SAT average was inflated by six points in 2005 and four in 2004. The school says it isn't sure the scores ever were correct before this year.

"We were not at all trying to do this in any way to increase our rankings," says interim admissions dean Stuart Schmill.

Excluding the test scores of foreign students -- which tend to be lower than those of U.S. students in reading -- is one of many tricks that have plagued the U.S. News numbers. These days, the magazine asks schools to certify that international students who provided test scores are included, and deducts points for those who don't. MIT said it did. ...

In the end, says Robert J. Morse, director of data research at U.S. News, a number of fluctuations -- including an increase in class sizes -- caused the school's drop in the rankings. Says Mr. Shmill: "It was a pretty harmless error, or we wouldn't be talking about it."

The estate tax exemption is not portable. As a result, when one spouse dies without having used the exemption, it disappears and cannot be used by the surviving spouse. While portability legislation has been proposed, Congress has thus far failed to act. This has made estate planning difficult for a significant number of married couples who have what might be described as intermediate-level wealth.

In a series of four private letter rulings, the IRS has responded sympathetically, creating in effect an administrative solution to the portability problem. The difficulty for taxpayers, however, is that, they are unable to rely on such rulings: In the absence of published guidance, the Service may decide to change its position and then apply its new position to taxpayers who have utilized the previously approved drafting blueprint without having secured their own ruling. This is particularly problematic because the Service's analysis in these rulings may well be incorrect. Indeed, if this analysis were incorporated in published guidance, it could undermine the Service's enforcement of the Code in unrelated contexts.

In this article, we suggest a new approach. Under our approach, taxpayers would be able to navigate the portability problem, and the Service would not weaken unrelated Code provisions. After explaining the portability problem, we explore the Service's private letter rulings. We then critique the Service's analysis and present an alternative solution for the portability problem. Finally, we suggest that the Service implement this solution administratively and show how taxpayers can safely employ our approach in the interim.

The hiring, firing, and re-hiring of Erwin Chemerinsky as founding dean of the new UC-Irvine law school has attracted enormous national attention. (For a roundup of coverage, see here.) Bill Henderson and I want to use this moment in time to generate and publicize the best ideas about reforming legal education from some of the leading thinkers in the law school world. Next week, TaxProf Blog will begin posting the answers of university presidents and provosts, and law school deans, faculty, students, and career planning professionals, to this question:

What is the single best idea for reforming legal education you would offer to Erwin Chemerinsky as he builds the law school at UC-Irvine?

The enormity of the earnings reported by some private equity fund managers has drawn sustained public attention to how such earnings are treated under the income tax. Reformers call for eliminating the preferential capital gains treatment accorded to the "carried interest" portion of fund managers' service compensation. One of the most prominent and thus far successful arguments against reform compares the tax advantage of carried interest to the supposed tax advantage routinely enjoyed by business owners who work in their own business and compensate themselves with "sweat equity" rather than salary. This paper argues that "sweat equity" is not only an inapt analogy for carried interest, but is, on its own terms, misconceived. The tax advantage of carried interest is a matter of exploiting differences in the marginal tax rates of fund managers and fund investors. The tax advantage to "sweat equity" is nonexistent.

Professor Bank reviews the theoretical and empirical literature on dividend taxation, and challenges the conventional wisdom about the consequences of making the 2003 dividend tax cut permanent. Two main conclusions emerge from Professor Bank’s analysis. First, even if the rise in dividend payments observed since 2003 is indeed attributable to the lower tax rate on dividends, it does not necessarily follow that making this tax cut permanent will increase or prolong the higher dividend payments. Indeed, under the “new view” of dividend taxation, firms may have responded to the tax cut by increasing dividends precisely because the tax cut was temporary; a permanent tax cut would, in contrast, have elicited no response. Second, efforts to influence corporate and managerial behavior through the tax system are at best fraught with difficulty, and may have counterproductive results. In the following discussion, my aim is to amplify these conclusions, while raising some questions and qualifications. Then, I focus on a neglected element of the 2003 reform, namely its international dimension.

I previously have blogged (here, here, here, and here) the fate of the venerable Glenshaw Glass Company, known to generations of tax professors, lawyers, and students as the party in the seminal Supreme Court case on the definition of income profiled in Chapter 1 of our Tax Stories book. (My summary of the chapter in Tax Archaeology, my Introduction to the book, is reproduced below the fold.) I am pleased to report that the Glenshaw Glass Company is back in business thanks to a private equity firm.

In October 2004 Congress passed the American Jobs Creation Act (“AJCA”). Among other things, the AJCA created § 409A to address perceived abuses of nonqualified deferred compensation. Section 409A contains detailed and restrictive provisions relating to nonqualified deferred compensation including rules on when distributions may be made, when the arrangement may be renegotiated, and new penalties applicable if a plan fails to qualify under § 409A.

This paper focuses on how § 409A began largely as a reaction to the sizeable distributions to Enron executives from their nonqualified deferred compensation accounts shortly before Enron's collapse. The paper discusses how § 409A represents a major shift in nonqualified deferred compensation planning but does little to remedy the exact problem at Enron that gave rise to § 409A.

[The WaPo Bushism] loses some of its witty edge when served up with even a shmeer of context – let’s try some: The president was actually responding to a question about Alan Greenspan’s book criticizing him “for being fiscally irresponsible”:

“I respectfully disagree with Alan Greenspan when it comes to saying that this administration didn't handle the fiscal — fiscal issues we faced in a good fashion. As a matter of fact, we did. The deficit, as a percent of GDP, is low; it's lower than the 30-year average. We have submitted a plan to balance the budget. We dealt with a recession, a terrorist attack and corporate scandals. And we did it by cutting taxes. The tax cuts worked. The economy recovered. People are working. Interest rates are low.”

So the President never really suggested we dealt with 9/11 or corporate scandals by cutting taxes.

God has apparently responded to a lawsuit filed by a Nebraska lawmaker, and one of the filings seems to have dropped in from the heavens. "This one miraculously appeared on the counter. It just all of a sudden was here, poof!" said John Friend, clerk of the Douglas County District Court in Omaha. The response was one of at least two to a lawsuit filed against God last week by state Sen. Ernie Chambers of Omaha, the state's longest-serving lawmaker.

Chambers said in his five-page lawsuit that God has made terroristic threats against him and his constituents, inspired fear and caused "widespread death, destruction and terrorization of millions upon millions of the Earth's inhabitants." The self-proclaimed agnostic is seeking a permanent injunction against God. Signed by "God," the response filed Wednesday argues the defendant is immune from some earthly laws and that the court lacks jurisdiction over God. Blaming the Almighty for human oppression and suffering misses an important point, it says. "I created man and woman with free will and next to the promise of immortal life, free will is my greatest gift to you," according to the response. St. Michael the Archangel is listed as a witness, Friend said.

Another response, also signed God, says the Lord disputes Chambers' allegations. That filing lists a phone number for a Texas law office. A message left there was not immediately returned Thursday. Chambers could not be reached Thursday. Chambers said his lawsuit is serious but also makes a point: Anybody can sue anybody.

In the United States, it is common for legal scholars, economists, politicians and others to claim that we are selfishly harming “our children and grandchildren” by running large government deficits. This article first asks two broad questions: (1) Do we owe future generations anything at all as a philosophical matter? and (2) If we do owe something to future generations, how should we balance their interests against our own? The short answers are “Probably” and “We really are not sure.”

Finding only general answers to these general questions, I then look specifically at U.S. fiscal policy and its effects on conventionally-measured living standards, exploring a set of issues that can be captured in the following question: If we knew that our grandchildren were going to have incomes 100% higher than current incomes, how would we feel about changing our policies today such that our grandchildren's incomes would be only 93% higher (or, for that matter, 107% higher)? This is, surprisingly, the essence of the fiscal policy question that we face in the U.S. today, as even pessimistic forecasts indicate that living standards over the next 75 years will more than double (if not triple or quadruple).

Using standard utilitarian and Rawlsian analyses, it turns out that people facing this situation would either stop worrying about future generations' economic well-being or might even enact policies to shift economic well-being from the future to today. I then argue that a better approach to analyzing intergenerational issues is to view them as simple matters of distributive justice, focusing on how policies change the distribution of incomes across time as well as currently. Such an approach simplifies the analysis and allows us to protect the interests of our children and grandchildren in a more meaningful and long-lasting sense.

This Report continues our analysis of Department of Revenue of Kentucky v. Davis, a case scheduled for argument in the upcoming Supreme Court term. The issue in Davis is the constitutionality of Kentucky's practice (shared by all other states with an income tax) of taxing interest on federally-exempt bonds issued outside Kentucky while exempting its own municipal bonds from taxation. In this installment we evaluate skeptically a number of possible state interests that might be offered to justify that practice. For example, we point out that Kentucky's assertion that the policy conserves state revenue is wrong. We also argue that, if the goal is to transfer revenues from the state to local governments, then exemption is inferior to direct grants.

The ABA Section of Taxation decided to survey its membership to determine the members’ experience relating to the perceived independence of the IRS’s Appeals Division. In that regard, a seven-page survey instrument was developed by the Committee on Administrative Practice and a “Blue Ribbon” panel of members to solicit opinions from Tax Section members who have had experience with Appeals in the recent past regarding the independence of the IRS Appeals process from the examination, collection, and the enforcement functions of the IRS. Over 560 Section members responded to the initial evaluation questions in the survey, and they provided over 70 pages of comments about the positive and negative aspects of their recent experiences with IRS Appeals.

A substantial fraction of taxation and expenditure in developed economies is devoted to social insurance, especially to finance consumption during years of retirement (including consumption of medical care). Systems typically impose a labor income tax—such as a flat-rate payroll tax—during working years to finance payments to retirees.

This chapter first analyzes purely redistributive aspects of social security schemes in a setting in which individuals are taken to be rational, far-sighted utility maximizers not subject to liquidity constraints. Then these assumptions are relaxed for purposes of considering a central feature of social security, the forcing of a minimum level of savings. Finally, but briefly, some additional insurance dimensions are noted. A number of other important features of social security are not inherently related to the central themes of this book and therefore are omitted, including broader fiscal issues involving deficits and investment policy as well as political economy considerations, such as those related to pre-funding and the merits of privatization.

Although there is consensus about the need for equity, academics and policy makers disagree about the best tax system because we have ignored the need to first identify equity goals appropriate for a just government and then to design a tax system to help achieve those goals. This article proposes that the principal equity goal underlying a just government is the creation of equal opportunities for all citizens to achieve self realization, i.e. to maximize their potential. It proposes, therefore, that a tax should be designed to achieve equal opportunity for self realization as one of its principal goals. Viewing equal opportunity for self realization as a design issue leads to the identification of another principle that is foundational - the promotion of democracy. Both political philosophy and empirical literature suggest that equal access to the electoral process and participation in the community has to exist in order for equal opportunity for self realization to exist. Designing a tax system to help achieve these goals will not only increase equity, but also may provide efficiency gains that analysts have previously ignored.

A Black Critique was an important and necessary work in the debate on the economic condition of blacks in America. This Article recommends that the debate include a discussion of class differences within the black community, as well.

Professors Moran and Whitford provided arguments for a race-based approach that is interesting and thoughtful, but their proposals reflect the limitations of race in this context. That limitation does not, however, diminish the significance or the importance of their work. The complicating issue is what to do about the racial economic/tax disparity. Possible answers are grounded in economics, history, politics, social justice, and law.

This Article does not endorse the use of the tax code as an exclusive means of addressing the racial disparities acknowledged in A Black Critique. I assume Professors Moran and Whitford would not either. The tax code would be supplemental to other methods needed to address the educational, wealth, and employment disparities that impair the economic condition of blacks. Analysis of black class distinctions is necessary in discussing and understanding the divides between the races and within the black community.

The paper uses a consequential perspective to explore the design features of a target-effective general anti-avoidance rule (“GAAR”). As emphasized by David Weisbach, this perspective frames tax-avoidance activity in terms of its allocative and distributional effects. Most importantly, it supports the proposition that there is nothing in the consequential attributes of tax avoidance that justify its acceptance by tax policymakers. Instead, tax avoidance should be viewed as any other market activity generating negative externalities, and externality theory suggests appropriate policy instruments that can be used to eliminate the consequential attributes of avoidance behavior. Different types of tax avoidance present, however, different identification issues that, in fact, lie at the core of the different concepts of tax avoidance that are the focus of economics and law.

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Earlier this year, an article by Victor Fleischer [Two and Twenty: Taxing Partnership Profits in Private Equity Funds, 83 NYU L. Rev. ___ (2008)] a professor now at the University of Illinois College of Law, helped turn a technical aspect of partnership taxation into the most contentious tax policy issue of 2007. Members of Congress, the George W. Bush administration, the 2008 presidential candidates, academic commentators, and the media have now joined the debate about what tax rate should be applied to “carried interest,” a major component of the compensation of private equity fund managers. Carried interest is the managers' share of the profits from the fund’s investments. Under current law, managers are taxed on much of the carried interest at the 15% rate used for dividends and capital gains rather than at the top 35% percent rate used for ordinary income. Congress is now considering a proposal to tax the carried interest as ordinary income. Any such change could also impact other industries, including real estate and oil and gas.

Supporters of the pending proposal [including David Weisbach of the University of Chicago, author of The Taxation of Carried Interests In Private Equity Partnerships, 116 Tax Notes 32 (7/31/07), funded by the Private Equity Council], argue that carried interest is a form of earnings that managers receive for their work and therefore should be taxed at the same rates as wages. They contend that it is unfair for these high-income managers to pay a lower tax rate than middle-class workers. Opponents of the proposed legislation maintain that the current tax rules are appropriate because carried interest is no different than other dividends and capital gains. They warn that tax changes in this area could harm investment and economic growth. Various alternative reform plans have also been suggested.

Alan D. Viard, a resident scholar at the AEI, was the third panelist. Kevin A. Hassett, director of economic policy studies at the AEI, was the moderator.